Decommissioning Insight 2018

1 Foreword The UK’s offshore oil and gas industry is entering a new phase of life, with decommissioning taking its appropriate place alongside exploration and production activity across the UK Continental Shelf (UKCS). As Oil & Gas UK’s 2018 Decommissioning Insight report shows, the industry is committed to achieving decommissioning excellence, matching the international reputation for operational excellence it has earned over the last 50 years. This report provides a fresh insight into the UK’s decommissioning market over the next ten years (2018–27) as well as wider North Sea activity in Norway, Denmark and the Netherlands. In doing so it expands the information available to operators planning to decommission assets and broadens supply chain awareness of the demand for their services and expertise around the North Sea. Practioner profiles have been included, with the aim of capturing the UK supply chain’s growing experience, innovative technology and competitiveness. Examples from decommissioning practitioners and recent projects underline the benefits of collaboration and are driving cultural change across the sector. The prize is enormous; the industry will spend around £15 billion over the next decade on decommissioning on the UKCS and is committed to delivering a safe, environmentally sound and cost-effective outcome. Globally, the decommissioning market is estimated to be worth over $80 billion over the next ten years and companies which show mastery of decommissioning in the UK will be well positioned to secure a share of the rapidly growing international market. Cost leadership in decommissioning is essential to extend the productive life of the UKCS and encourage reinvestment in new opportunities. Rapid improvements in productivity and efficiency are already being achieved with good effect. Forecast decommissioning costs per well have fallen by an average of 26 per cent over the last year. Decommissioning spend in 2017 came in almost 30 per cent lower than anticipated at £1.15 billion. Likewise, decommissioning expenditure is set to be almost 20 per cent lower over the next decade, saving almost £4 billion over the period. Such achievements demonstrate that the decommissioning market is maturing, and industry has the capacity and commitment to safely deliver the 35 per cent cost reduction target through a combination of performance improvement, cost control, technological innovation and an openness to adopting new business models. Yet theUKCS is far from in its end game; a steady flowof decommissioning activitymay have helped some companies negotiate the downturn the industry has faced over the last four years, but we are now beginning to see a steady increase in investment. To date, 12 new projects have been approved in 2018 which will attract almost £3.3 billion of capital investment and produce 400 million barrels of oil equivalent over time. Decommissioning expenditure is stabilising and is projected to be about 8 to 10 per cent of total expenditure going forward, competing for funding alongside exploration and production activities.

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